Southern to get control inside Kroger... plus "slotting fees" for alcohol?

"Kroger plans to upend how it organizes booze in stores" 

The WSJ published an article on Friday about how Kroger plans to change how it organizes alcohol in its stores. The new plan benefits Southern Wine & Spirits - the distributor we've learned about which recently struck a deal with Glazer (the new combined company will have ~30% market share).

The article highlights a few parts of the new proposal:1) The decades-old system, will be replaced. In the old system, the biggest alcohol producers were tapped by Kroger and other grocers to be “category captains,” dispensing advice and influence about how much shelf space and prominence to give brands.2) The new plan calls for Southern Wine & Spirits to oversee how much display brands get in the grocery aisles of the more than 2,600 Kroger stores in 29 states.3) It also asks the alcohol companies (not Kroger) to pay Southern for the service. The new system would ask the alcohol industry to pay quarterly fees based, in part, on how much volume a store carries.

Kroger hopes the new plan will give them more flexibility to rearrange store shelves to adjust to changing customer tastes, by adding new craft brands, and by making seasonal changes.

Trade associations representing the alcohol industry sent letters to federal regulators last month questioning the legality of the Kroger plan. The article cites issues we have just learned about in class, including "Prohibition-era laws ban alcohol manufacturers from giving retailers anything of value to keep them from marketing too aggressively."

Critics (and small craft brewers) say the system is unfair and is becoming "pay to play."

The article describes how manufactured food goods, such as cereal and coffee, already pay "slotting fees" to Kroger. The company denies that the new plan for alcohol is the same, as the fee that will be paid to Southern is voluntary, and Kroger does not make a profit from the fee.

There will certainly be a lot of lobbying and debate before this plan gets approved - but if it does, it could have significant implications for the industry.